A Victorian fantasy: the lady of the house's bedroom in the doll's house created by José Alesón. Photograph: José Alesón

A couple of years ago, a catalogue arrived at José Alesón's workplace by mistake. A collection of doll's house miniatures. He began flicking through, and an interest that had lain dormant for 15 years was piqued. As a teenager, growing up in Santander in northern Spain, Alesón poured his love of antiques and history into a cabinet of miniatures, an alternative world picked out in mirrors, pianos, sideboards, dining tables, each just a few inches tall. He is now in his early 30s, lives in north London and works as a customer services adviser in a high-street bank, and every spare minute of the past two years has been spent on another project, Victoriana, his Victorian doll's house. Once he started, "I couldn't stop," he says. "I went to fairs in Milan, Andalucia, Madrid, Chicago … It's been every Sunday, every morning up until 3am changing things around, or I'll be in the gym thinking, 'I need to get this.'"

Alesón is incredibly precise and incredibly friendly. In his immaculate living room, he shows me to the doll's house in the corner, the place where most people keep their TV. There's something oddly intimate about being shown inside. It's so perfect, I burst into startled laughter. Each item has been chosen because it coheres to a specific story Alesón has constructed about the house's residents.

In the bedroom for housemaid Rose there are tiny postcards tacked to the wall, an album of cigarette cards on the bed and books piled haphazardly beneath. The family are living in the 1910s, and in Lady Alesón's room, there is a pair of shoes and a bag on the floor, gloves slung on the bed, to give a sense of a woman in a hurry. "In 1912, there were the suffragettes," he says, "and all these ladies who wanted to be more than just a lady. So Lady Alesón has come into the room, and she's in a rush, she's left her handbag on the floor because she's off for a meeting. Maybe she's friends with the Pankhursts."

Lord Alesón is an explorer, a former soldier – and an extension of Alesón himself. Some of the items bear his initials. There's a set of whisky glasses and a decanter in the library, which he commissioned a craftsperson to etch towards their base with the tiniest criss-crosses, to mirror the contemporary fashion. Each glass is about half the size of a person's smallest fingernail.

The miniature house is covered in family portraits. There's Alesón's great-great-grandfather, who was a doctor; his grandfather at his first communion; a picture of Alesón himself. But there are no dolls. Like many adult doll's house collectors, Alesón isn't keen on them. This way, "if you see pictures of the house, you don't know if it's a miniature or not. It's like a mind trick … It would be broken by a doll, because a doll is not a real person."

Does he play with it? "It's not to play with," he says. "But you know what, there's nothing more relaxing than sitting here at night, with the lights off, and all the lights on in the doll's house, enjoying that moment. I like everything to be in order, and this is a kind of perfection. It's like you've stopped time."

Alesón isn't the only person who occasionally resides in a small world. This weekend, thousands will attend the Kensington Dollshouse festival in London, which many consider the best miniatures show in Europe. There are more than 170 exhibitors, showing dogs, birds, suitcases, cotton reels, chairs, chandeliers, plants. Most of the miniatures are a standard 1:12 scale.

The festival is run by former ballet dancer Charlotte Stokoe, who guesses there are about 100,000 UK collectors, served by three monthly miniatures magazines. Makers are often highly specialised. Stokoe met a woman once who made "amazing little matchboxes, which opened, and had all the individual matches. The box must have been half a centimetre big. That was all she made."

As Halina Pasierbska writes in the book Dolls' Houses, the first recorded house was made for the duke of Bavaria in 1557-8, as a copy of his residence. In the 16th century and beyond, dolls' houses became a way to showcase the owner's wealth, or instruct upper-class girls in household management. These days, the appeal for adult collectors is much more varied and knotty. Partly it comes down to having a space they can control, says Stokoe. "Maybe in their real house they have children running around, leaving rubbish everywhere, not tidying up after themselves. And with a doll's house they can have it exactly as they want. If they want dirty dishes in the sink, that's their decision." Many steer clear of dolls, "because they feel that the house belongs to them," she says, "and they don't want strangers in there". That said, she once heard of someone who had had her family made in miniature, and when her daughter broke her leg, the doll of the daughter had to have a broken leg too.

Dolls' houses represent a form of wish fulfilment. Alesón knows he's never going to have a real Victorian house that big, he says; this way he can collect reproduction antiques without taking up too much space. He has also always dreamed of having a very specific time machine, which would allow him to experience being both rich and poor in the same era. In constructing the house, he has imagined and compared the two states.

Sarah Whitlam has also created the kind of home she could never really have. She lives in suburban Chelmsford in Essex, and in the corner of her dining room sits a fantasy castle. She worked on it for seven years. There is a snakeskin kitchen, a cocktail bar, an enormous bathroom with a toilet painted in gold leaf. Whitlam works in hotel management, and the design for the bath – raised on a plinth covered in stones – was copied from one in the building where she works.

There are crocodiles on the roof, snails on the wall, a woodpecker and squirrel in the tree outside – and a tattoo parlour, complete with tiny disclaimer forms. Also, a bondage room. "I wanted a dungeon in the castle really," says Whitlam, "but there's nowhere to go underground. There was a spare room though, so I did an upstairs dungeon." A surprising number of the miniatures she needed were available, she says. A company called Delph makes tattoo guns and ink pots, and she found a woman selling 1:12-scale condoms at a craft centre in Braintree. But she did have to make many of the bondage-room items herself: the swinging bed, mirrored ceiling, handcuffs and whips.

Is this her dream home? "I think it probably would be," she says. There's that lovely big bathroom, I offer nervously. "Yep," she replies patiently. "And it's got a dungeon." Whitlam is very welcoming, but she likes being able to shock people with the house, she says, and open their imaginations. In arranging the rooms, she wanted them to look properly lived in. "There are people doing these modern houses that have a coat draped over the back of a chair, and I love that," she says; the illusion that someone has just left the room, that their presence lingers.

Miniatures do seem to stir up aparitions. For the past few decades, Robert Dawson of The Modelroom has been creating brilliantly detailed models of palaces and townhouses – Versailles, the Doge's palace, part of the Vatican City – projects that can take a year and cost as much as £100,000. They are often commissioned for museums. He started out as a theatre designer, and is a big presence in his small studio. (The holes in the ceiling are a result of him miscalculating the height of the Vatican building.) Miniatures are powerful because they distill a room to its essence, he says, and force people to look very closely, to engage with places in an unexpected and imaginative way.

Dawson has been trying to move towards storytelling in his work, which has taken him down some whimsical roads. One customer asked for a doll's house based on a fictional character she had created, a 19th-century jewel thief, so they built a house for him, with a revolving fireplace, a library with a fake bookcase, "a grotto with a swan boat which he used to get away. And at the top, in the attic, if you peered through the window, you could see hot air balloons."

His interest in storytelling has also led him to consider darker projects. Dawson saw a picture a couple of years ago of a warehouse that had been the scene of a massacre. "The bodies had been cleared away, but it was imprinted with this extraordinary human experience. If you could present something that made people engage with what happened in this place, I think that would have a value and maybe transcend the danger of being voyeuristic." He collected some pictures, "and I was trying to work out what it was about this breeze-block space that conveyed such despair. Was it simply because I knew it? Or was there something fundamental that had been burned on to the walls?"

Dawson says dolls' houses are sometimes used in therapy, because they offer a safe, neutral territory, and can be closed up at the end of the session. And it's certainly true that people have deep connections to their dolls' houses. Fiona (AKA Bea) Broadwood makes affordable ones in a smaller-than-usual scale – 1:24, 1:48 or even 1:144 – under the name Petite Properties, and has had extraordinary commissions. One woman wanted to recreate her childhood home and "was very specific about the outdoor toilet she wanted," says Broadwood. "It had to have specific cracks in the brickwork, because her brothers used to terrorise her with spiders they'd find in those cracks". Another commissioned a funeral parlour. "It was going to have a little desk and some sample coffins, and some nice chairs for the bereaved."

Broadwood lives in Lincolnshire, and when she started, almost 10 years ago, the demand was for traditional Georgian and Victorian properties. But with the rise of genealogy, she says, many of her customers are recreating their grandparents' houses in miniature. She often makes old council houses, some flattened years ago, with just grainy photographs to work from. "You've got a door and a window, and somebody stood there in a wrap-around pinny … I get them to write about the house as well, to be as descriptive as they can."

The reaction from customers can be emotional. One of Broadwood's favourite commissions was a terraced house that a customer's grandparents had lived in. "When the woman collected it, she just erupted in tears, and it took ages to compose herself. I knew I had got it spot on."

Of course, not all adult collecting tends to darkness. I head to the last remaining specialist shop in London, an unmarked frontage opposite Gospel Oak station in north London, which announces its purpose via the doll's house in the window. Run by Kristin Baybars, it officially goes by her name too, and is by some measure the most magical shop I have ever visited. Every surface is covered in miniatures: plates of sausages, oysters, scallops, jam tarts. There are tiny jars of pickled onions, perfectly turned wooden chairs, Victorian kitchenware with whisks that revolve, a tiny loom that actually works.

Baybars, a long-haired woman in her late 70s, leads me to some wooden children's chairs, and we sit with our knees about our ears. The daughter of the poet Ida Affleck Graves and the artist Blair Hughes-Stanton, her interest in miniatures was first stirred as a very small child when she was offered a visit to a flea circus. It fell through at the last minute. "Agony," she says. "I did see a film of fleas later on, when I was about 40 or 50, but I never did get to see that circus."

Baybars started making her first doll's house at 15. She was determined to make hundreds of hand-turned mahogany banisters, but needed a lathe, so roped in three other girls at her school to help her in a dishwashing enterprise to raise the money. It took two years. In the 1950s, she became a toys buyer, and toy-maker, for Heals department store, and she and creative partner Minnie King made the Humpty doll for the TV programme Play School.

Baybars has had her shop for almost four decades. She takes me back through its corridors, filled with dolls' houses she has collected or made herself. One is filled entirely with miniature dogs and cuts of meat. Another depicts a school room, another a historic dentistry scene. There is a "spooky corner" with a guillotine, gallows and some libertine lady dolls, out on the carouse. The place is both shop and museum, with products from some makers long since dead, whose work she refuses to sell.

I wonder if she ever finish that dolls' house she started at 15. "No," she says. It's still at her family home, and her mother, "almost up to her death, said: 'Kristin, when are you going to make the kitchen table?' And I never did. It's still all laid out on the ground, because I want to do it all."